What does the Mortgage-Equity Rate represent?

The Mortgage-Equity Rate represents the relationship between a property's equity and the outstanding mortgage on it. Specifically, equity is defined as the difference between the property's current market value and the amount owed on the mortgage. In this case, the correct interpretation is that equity is calculated as the purchase price of the property minus the loan amount.

This understanding is crucial for evaluating how much of the property you actually own outright—the higher the equity, the less of the property is financed through a mortgage. It also helps in making decisions related to refinancing, selling, or leveraging the property for further financial opportunities. By recognizing equity as the purchase price minus the loan, you gain insight into both the asset's value and your stake in it, which informs various real estate transactions and investment strategies.